The Myth Of Inventory Finance Corporations

Your organization carries it. You have to have to finance it. We’re of course speaking about inventory. Discussions with clients reveal a lot of misconceptions about inventory financing in Canada. Let’s attempt and resolve some of these myths about the financing of your inventory, who the players are, who they are not ( that’s the most prevalent myth ) and we’ll also try and give some straight forward direction on next steps in your inventory financing challenge.

The overall high-quality of your inventory management will play a big component in your capacity to finance your solutions, which are a element of the existing assets component of your balance sheet. You can not overlook the importance that an inventory lender will spot on your potential to report and count your items. The reality is that most firms are either carrying a ‘ continuous’ or ‘ ‘periodic’ system of inventory control.

So right here is solid tip # 1 – be aware that inventory lenders favor a continuous form of inventory accounting, for all the obvious factors. Primarily you are counting and monitoring inventory (with the use of software of course!) at all instances. That is a great factor when it comes to a lenders valuation on an ongoing basis and their capacity to lend.

You are business is expanding. Sadly so is your inventory! And that places a massive drain on your money flow. The operating capital cycle dictates that cash turns into inventory which turns into receivables and then we get started all over… that lag can be anyplace from 60 – 120 days, from time to time longer. By prenumerationshantering underestimate the problem that larger sales will bring to your inventory financing needs.

Clientele typically are seeking for inventory financing for the reason that the level of investment that you have in item and receivables drains your money flow. As sales volumes enhance your money flow decreases primarily based on your all round collection period of A/R and of course these inventory turns.

Your sales employees of course by no means wants to be in a position to tell a customer you do not have the item they have worked so really hard to sell.

Does your corporation have an inventory financing tactic? The majority of firms we speak to in Canada, certainly in the modest and medium company sector do not have access to the inventory financing they will need. Do financing companies exist in Canada? We really feel that the answer is generally ‘ no ‘, they do not. Nevertheless if your firm would contemplate an asset based lending scenario that in impact takes the location of inventory finance providers in Canada.

Below an asset primarily based lending approach your inventory is margined for what its worth, by experts who categorically know what its worth. You will enhance your capability to finance your item if you have the controls, reporting, and inventory accounting technique in areas that makes the inventory and asset based lender ‘ comfortable ‘.

Speak to a trusted, credible, and experienced business financing advisor with regards to inventory financing businesses and asset primarily based lenders who will give your product the financing it deserves!